Sean McGrath

Senior VP - Investments
[email protected]
Office: 800-435-3550
Fax: 800-354-1543

GO FIGURE....

1) BUYING MASSIVE AMOUNTS OF BONDS

Securities that are held outright held by the Federal Reserve as of 3/25/15 were worth $4.228 trillion. With an average interest rate of 2.358% on the USA's interest bearing debt (as of 2/28/15) the Fed will receive $100 billion a year in interest payments, i.e., $8.3 billion a month. The Fed wants to keep reinvesting the interest payments it receives at least until after it begins raising short-term interest rates (source: Federal Reserve).

2) WATER WOES

93% of California is experiencing at least a "severe drought" (note that the continuum of droughts is defined as a range from "severe" to "extreme" to "exceptional"). 14% of the United States is experiencing at least a "severe drought" (source: U.S. Drought Monitor).

3) RICH DUDE

Los Angeles Dodger pitcher Clayton Kershaw's 2015 salary is $32.571 million. Kershaw faced 749 batters in 27 starts last year. If Kershaw faces 749 batters this year and averages 4 pitches per batter (his average was 3.63 pitches per batter in 2014), then his 2015 salary equates to $10,871 per pitch (source: MLB).

WEEKLY QUOTE

"Look at all the sentences which seem true and question them."

- David Reisman

WEEKLY RIDDLE

A man bet his neighbor that his dog could jump higher than his neighbor's hedge. The neighbor accepted the bet and lost. Why?

Contact our office or see next week's Update for the answer

Last newsletter's riddle:

Its body of stone shields a fiery heart. Under sufficient pressure, its head will depart. What is it?

Answer:

A volcano.

INTERESTING

2014 World Population

March 30, 2015

THE MARKETS

So, when is the Federal Reserve going to increase the rate for overnight borrowing?

It's a question that has plagued bond investors throughout the first quarter of 2015. In January, 10-year Treasury yields fell as low as 1.6 percent. Early in March, they rose to about 2.2 percent before falling back below 2.0 percent. The Financial Times reported:

"Higher volatility is typical when markets are on the cusp of a major turning point, and that has been the story so far this year for U.S. Treasury debt... The year has already been characterized by big swings in bond yields, which move inversely with prices... The lack of a clear signal over when policy shifts towards a tightening phase may provide the central bank with greater flexibility but does not quell the uncertainty facing investors."

In recent weeks, Fed Chairwoman Janet Yellen indicated the timing and pace of a rate change would be determined by economic data. In general, the Fed considers a variety of employment and inflation measures when determining policy. The Times suggested bond markets have priced out the possibility of a June rate hike, although several Federal Reserve officials recently said a June increase is still under consideration.

U.S. stock markets reflected investor uncertainty last week, too. Turmoil in the Middle East sparked concern an oil price reversal could occur if supply is disrupted. In addition, investors worried weaker-than-expected economic data might indicate U.S. economic growth was slowing. The Commerce Department reported business investment spending plans fell for the sixth straight month. That could result in reduced expectations for first quarter growth, as well as delay a Fed rate increase. Stock markets showed signs of life late in the week but finished lower.

YOUR GRANDPARENTS AND GREAT-GRANDPARENTS SAW A LOT OF THINGS CHANGES CURING THEIR LIFETIMES...

During the 20^th century, the first Nobel prizes were awarded. The first license plates were issued. The first World Series was played. Americans lived through McCarthyism, the Great Depression, and Orson Welles' 'The War of the Worlds' broadcast. Rock and roll became popular. The first theme parks opened, NASA was formed, and Earth Day was introduced. Two World Wars were fought as well as the Vietnam, Korean, and Gulf Wars. The Gold Standard ended and the tech revolution arrived.

Many of these events had immediate or eventual implications for industries - automobiles, sports, communications, entertainment, defense, technology, and others - as well as financial markets. The last decade has seen some significant changes, too. Here are a few milestones we've witnessed:

2006: The United States population passed 300 million. (100 million in 1915; 200 million in 1967)

2007: More babies were born in the United States than in any other year in American history.

2008: Nielsen reported texting had become more popular than calling.

2009: More people lived in urban areas than in rural areas across the globe.

2010: This was the hottest year since 1880 - until the record was broken again in 2014.

2011: Digital music sales overtook physical music sales for the first time ever.

2012: China became the world's biggest trading nation and largest pork producer.

2013: The United States overtook the Saudis to become the world's biggest oil producer.

2014: China's economy surpassed that of the United States.

2015: Millennials (born 1980 to late 1990s) became our nation's largest living generation.

When considering investment opportunities, it can be helpful to ponder the ways in which demographic and economic shifts may affect the future and what types of businesses may benefit (or not benefit) from the changes.

Securities & investment advisory services offered through Western International Securities, Inc. Member FINRA/SIPC. "This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Western International Securities, Inc."